Brexit latest: Mortgage approvals and consumer credit slowdown in May says British Bankers Association

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Mortgage approvals and household credit growth both slowed in May, adding to the picture of the British consumer beginning to flag in the face of rising inflation and political uncertainty related to Brexit.

According to the the latest data from the British Bankers Association, the annual growth in consumer credit eased to 5.1 per cent in the month, down from the 6.4 per cent rate recorded in April. It was the weakest growth rate since October 2015.

Meanwhile, the number of new mortgages recorded by the BBA was 40,347, down from 40,686 in April and the lowest figure since last September.

The bulk of the UK's GDP growth since last June's Brexit vote has come from consumer spending and has been supported by borrowing and households reducing their savings.

The ONS estimates that the aggregate household savings ratio fell to a record low of just 3.3 per cent in the final quarter of 2016 (although this level is expected to be revised for technical reasons).

But GDP growth crashed to 0.2 per cent in the first quarter of 2017, down from 0.7 per cent in the final quarter of 2016 and most economists are expecting consumer price inflation – which jumped to 2.9 per cent in May – to suppress household spending and activity in the dominant services sector in the second quarter too.

“[This BBA data is] more evidence that households have become reluctant to make financial commitments now that real incomes are falling again," said Samuel Tombs, economist at Pantheon.

This data relates to the period directly before June's general election.

“This month's figures show that in the run-up to the general election, credit growth in personal loans, cards and overdrafts has slowed, which was reflected in lower spending,” said Eric Leenders, the BBA’s managing director for retail banking.

Corporate borrowing in the month was up 2.8 per cent year on year, similar to that in April.

“Businesses appear to be weighing up their options before raising finance to fund projects or developments. After a long period of subdued company borrowing, overall growth is starting to stabilise at a modest rate,” said Mr Leenders